XIII: CONFLICT OF INTEREST

Answer

1. The purpose of the conflicts of interest provisions set forth in this Article XIV is to protect the Association’s interest when it is contemplating entering into a contract, transaction, or arrangement that might benefit the private interest of a Director, officer, or key employee of the Association. This Article XIV is intended to comply with certain requirements for federal tax exemption, and not to replace, any applicable state laws governing conflicts of interest applicable to nonprofit and charitable Associations.

2. Definitions:

(a) Interested Person. A person is an interested person with respect to a contract, transaction, or arrangement if the person is a Director, officer or one of the three (3) most-highly paid employees of the Association and has a direct or indirect financial interest in a contract, transaction, or arrangement, as defined below.

(b) Financial Interest. A person has a financial interest in a contract, transaction, or arrangement if the person, or a spouse, parent, sibling, or child of the person in each case either directly or indirectly through one or more intermediary entities:

(1) Is a party to, or expects to be an assignee of, the contract, transaction, or arrangement;

(2) Has an actual or potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Association has or is contemplating or negotiating the contract, transaction, or arrangement; or

(3) Holds or expects to hold a position as an officer, Director, trustee, member or other similar authority (whether or not an ownership, investment or compensation arrangement is also present) with any entity or individual with which the Association has or is contemplating or negotiating the contract, transaction, or arrangement.

(4) Compensation includes direct and indirect remuneration as well as gifts or favors that are material in amount. A contract, transaction, or arrangement includes, without limitation, a grant or program involving the Association and any entity or individual. A financial interest shall not include a person's ownership of less than five percent (5%) of any class of publicly traded securities of any entity.

(c) Conflict of Interest. A financial interest is not necessarily a conflict of interest. Under this Article XIV, a person who has a financial interest shall be presumed to have a conflict of interest unless the Board of Directors decides that a conflict of interest does not in fact exist pursuant to the procedures set forth in Article XIV.

3. Procedures:

(a) Duty to Disclose. Each person who is an interested person with respect to a contract, transaction, or arrangement that the Association is considering or negotiating shall disclose to the Board of Directors, in writing, all material facts relating to his or her financial interest in the contract, transaction, or arrangement and all material facts relating to the contract, transaction, or arrangement.

(b) Determining Whether a Conflict of Interest Exists. After disclosure of the financial interest and all material facts, and after any discussion with each interested person, an interested person shall be presumed to have a conflict of interest unless the Board of Directors, without the presence or vote of any interested person, discusses and determines by a majority vote that the interested person does not have a conflict of interest with respect to the contract, transaction, or arrangement.

(c) Procedures for Addressing a Conflict of Interest. If the Board of Directors determines that an interested person has a conflict of interest with respect to a contract, transaction, or arrangement:

(1) The interested person may make a presentation to the Board of Directors regarding the contract, transaction, or arrangement with respect to which the interested person has a conflict of interest, but after such presentation, shall not participate in the discussion of, or the vote on, any determination relating to the contract, transaction or arrangement.

(2) The President shall, if appropriate, appoint a disinterested person or committee to investigate alternatives to the proposed contract, transaction, or arrangement.

(3) The Board of Directors shall not approve the contract, transaction, or arrangement with respect to which an interested person has a conflict of interest unless, after exercising due diligence, the Board of Directors, without the presence or vote of any person who has a conflict of interest, discusses and determines by a majority vote that (a) the Association cannot obtain a more advantageous contract, transaction, or arrangement with reasonable efforts from a person or entity that would not give rise to a conflict of interest, (b) the contract, transaction, or arrangement is in the Association's best interest and for its own benefit, and (c) the contract, transaction, or arrangement is fair and reasonable to the Association.

(d) Violations of the Conflicts of Interest Policy. If the Board of Directors has reasonable cause to believe that a person has failed to disclose a financial interest in or an actual or potential conflict of interest with respect to a contract, transaction, or arrangement, the Board shall inform such person of the basis for such belief and afford such person an opportunity to explain the alleged failure to disclose. If, after hearing the response of the person and making such further investigation as may be warranted in the circumstances, the Board determines that the person has in fact failed to disclose an actual or potential conflict of interest, the Board shall take appropriate disciplinary and corrective action, including possible removal of the person from office.

4. Records of Proceedings. The minutes of the Board of Directors and all committees of the Board shall contain:

(a) The names of the persons who disclosed or otherwise were found to have a financial interest in connection with a contract, transaction, or arrangement; the nature of the financial interest; any action taken to determine whether a conflict of interest was present; and the Board's decision as to whether a conflict of interest in fact existed; and

(b) The names of the persons who were present for discussions and votes relating to the contract, transaction, or arrangement; the material content of the discussion, including any alternatives to the proposed transaction or arrangement that were considered; and a record of any votes taken in connection therewith.

5. Periodic Reviews. To ensure that the Association operates in a manner consistent with its charitable purposes and that it does not engage in activities that could jeopardize its status as an organization exempt from federal income tax, the Board of Directors shall ensure that periodic reviews are conducted by or under the direction of the Finance and Investment Committee, which shall, at a minimum, include reviews of whether (i) the Association's compensation arrangements and benefits are reasonable and are the result of arm's-length bargaining, and (ii) the Association's contractual and other arrangements with third parties, such as service providers, conform to the Association's written policies, are properly recorded, reflect reasonable payments for goods and services, further the Association's charitable purposes and do not result in inurement or impermissible private benefit. In conducting such periodic reviews, the Finance and Investment Committee may, but need not, use outside advisors. If outside experts are used their use shall not relieve the Board of Directors of its responsibility for ensuring that periodic reviews are conducted.